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Remarks by Deputy Assistant Attorney General for the Criminal Division David A. O'Neil at the Southeastern White Collar Crime Institute


Braselton, GA
United States

Thank you, Joe Whitley, for that kind introduction.  And thank you to the American Bar Association for inviting me to speak with you this morning about the Justice Department’s white collar criminal enforcement priorities and practices now and in the coming months.

I joined the Justice Department in 2006 as a prosecutor in the Southern District of New York.  Since that time, I have served the department in various capacities in the Deputy Attorney General’s Office, the Solicitor General’s Office, and now in the Criminal Division.  In my most recent roles as Acting Assistant Attorney General and Deputy Assistant Attorney General in the Criminal Division, I have overseen the Appellate Section, the Capital Case Section, and – most relevant to my remarks today – the Fraud Section.  The Fraud Section is the largest section within the Criminal Division, composed of nearly 100 prosecutors spread over three litigating units, the Securities and Financial Fraud Unit, the Healthcare Fraud Unit, and the Foreign Corrupt Practices Act Unit.  Along with the Asset Forfeiture and Money Laundering Section, the Fraud Section bears principal responsibility for the prosecution of complex white collar matters for the Criminal Division.   

Since you are all seasoned members of the white collar defense bar, I doubt that you’ll be surprised by what I tell you about the department’s priorities in the area of financial crimes.  And I also doubt you will be surprised to hear me say what speakers in my position always emphasize: cooperate with the government’s investigation; self-report early; assist us in holding individuals responsible.

I will say those things, but I’ll also highlight some recent prosecutions that exemplify, and perhaps put a finer point on, those themes.  I hope that the discussion will help to show – rather than just tell – how and why the department values cooperation and self-reporting, and rewards corporations that do so.   

Let me start by highlighting three of the department’s top priorities in the white collar arena, which I expect to remain top priorities in the coming years. 

Financial Fraud

In the wake of the economic crisis, prosecuting financial fraud became one of the department’s top priorities, and it remains one today.  In particular, the department has recently focused its attention on banks and large financial institutions. 

As you probably know, in 2010, the Criminal Division established the Money Laundering and Bank Integrity Unit within the Asset Forfeiture and Money Laundering Section.  You are seeing many of the high-profile results of investigations by that Unit, and others, most recently by way of the criminal resolution with BNP Paribas. 

In 2010, the Criminal Division touted forfeitures of more than $1.5 billion over three years.  That figure was, of course, dwarfed by the $8.8 billion forfeiture in the BNP Paribas case alone.  These cases – particularly BNP Paribas as well as Credit Suisse, a tax case – further demonstrate the Attorney General’s message that, “There is no such thing as ‘too big to jail.’ . . .   When laws indeed appear to have been broken, and the evidence supports the allegations, a company’s size will never be a shield from prosecution or penalty.” 

The Department has also recently announced landmark, multi-billion dollar civil settlements with JPMorgan, Citigroup, and Bank of America pursuant to the Financial Institutions Reform, Recovery and Enforcement Act.  Taken together, these cases illustrate the Department’s commitment to using all of the available tools – criminal, civil, and administrative enforcement – to aggressively investigate and appropriately punish corporate wrongdoing.

Healthcare Fraud

In addition to financial fraud, healthcare fraud remains a top priority for the department.  Recent media reports indicate that fraudulent billings constitute as much as 10 percent of the Medicare program’s yearly spending.  In the fiscal year ending in September 2013, the Department recovered several billion of these fraudulent billings through civil and criminal actions. 

The heart of the Criminal Division’s healthcare enforcement effort is the Medicare Fraud Strike Force, which was established within the Fraud Section in 2007.  Since its inception, the Strike Force has expanded to nine cities across the nation, and has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion in fraudulent claims.  While many of these prosecutions have focused on individual physicians, home health care providers, pharmacy owners and medical supply company executives, the Strike Force will follow evidence of healthcare fraud wherever it leads, including into corporate boardrooms and executive suites.

The Strike Force is proactively reviewing every single qui tam action that comes in, and regularly making inquiries at the U.S. Attorney’s Offices and law enforcement agencies around the nation about qui tam actions that may involve criminal conduct.  And, these are just two of many ongoing efforts focused on increasing our prosecution of healthcare fraud cases. 

As we work to increase healthcare fraud prosecutions in general, we are also focusing our attention on corporate and hospital executives. You may have read that the department recently announced the guilty pleas of Tracey Cota, the CEO of an Atlanta-area hospital, and Gary Lang, the co-owner and COO of an Atlanta-based medical clinic chain, in an ongoing investigation into a scheme involving the payment of illegal kickbacks in exchange for Medicaid patient referrals to hospitals in the Atlanta area and on Hilton Head Island in South Carolina.  These referrals ultimately resulted in Medicaid reimbursements of over $100 million to the hospitals. 

That case will not be the last one like it.  The department already has a record of holding individual executives responsible for their criminal wrongdoing in the financial fraud context; expect to see the Department to begin building the same kind of record of corporate and high-level executive prosecutions in the healthcare fraud context.   

Foreign Corrupt Practices Act

The fight against global corruption remains a priority of the Justice Department.  This fight is illustrated by our aggressive approach to FCPA prosecutions, which have included the indictment of corporations and individuals alike from all over the world.  Since 2009, we’ve convicted 47 individuals in FCPA and FCPA-related cases, and resolved criminal cases against 55 companies with penalties and forfeiture of approximately $3 billion.  Just since 2013, we’ve charged, resolved by plea, or unsealed cases against 25 individuals, and 10 corporations have resolved FCPA violations with combined penalties and forfeiture of approximately $790 million.

As just one example, earlier this year, the department announced Alcoa World Alumina’s guilty plea to FCPA charges stemming from its payment of millions of dollars in bribes, through an international middleman in London, to officials of the Kingdom of Bahrain in exchange for a long term supply agreement.  As part of the plea, Alcoa paid $223 million in criminal fines and forfeiture.  Although Alcoa was required to account for its criminal actions, the department publicly commended Alcoa for its cooperation, which included conducting an extensive internal investigation, making proffers to the government, voluntarily making current and former employees available for interviews, and providing relevant documents to the department. 

Also, earlier this year, the department unsealed FCPA charges against the former co-CEOs and general counsel of PetroTiger Ltd. for allegedly paying bribes to an official in Colombia in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million.  The general counsel and one of the CEOs already pleaded guilty to bribery and fraud charges, and the other former CEO is headed for trial in January in the District of New Jersey.  This case was brought to the attention of the department through voluntary disclosure by PetroTiger, which cooperated with the department’s investigation.  No charges were filed against PetroTiger.

So, what lessons can be learned from these recent cases?

Well, in addition to the subject matter prosecution priorities, I come back to the themes that the department has emphasized over the years about corporate responses to criminal investigations, including cooperate cooperation, the focus on culpable individuals, and, more recently, the global reach of the department.

Corporate Cooperation

The department continues to make clear to companies the benefits of cooperation, and, alongside, has transparently identified the lack of cooperation as one of the reasons behind our recent corporate resolutions involving guilty pleas.  Put simply, cooperation matters and will be credited.  This is a principle that we have applied to criminal cases across the spectrum – from violent and organized crime cases to corporate fraud cases – for decades.  If a company works with us, it not only helps the department, but it helps itself.  But if a company chooses not to cooperate, that choice has consequences to justice and to the company.

People often ask for concrete, case-specific evidence that cooperation matters – that it made the difference for a company in a particular investigation.  One such case, as you are probably aware, is Morgan Stanley.  In that case, while announcing charges against a former managing director for Morgan Stanley’s real estate business in China, the department took the unique step of publicizing its decision not to take any action against the company.  In doing so, the department commended Morgan Stanley’s robust internal compliance program, as well as its voluntary disclosure and cooperation with the government investigation.  There are many more cases in which a company received a better outcome from the department, including an outright declination, because of its timely and effective cooperation than it otherwise would have.  It is our standard practice not to publicize declinations, and often companies in this situation prefer that we not speak publicly about the outcome.  But the cases are there, and the benefits of cooperation are real. 

And there are cases on the flip side.  BNP Paribas not only failed to cooperate at the outset, but hindered the government’s investigation by dragging its feet.  This failure to cooperate had a real effect on justice, as it significantly thwarted the government’s ability to bring charges against responsible individuals and satellite banks.  This failure to cooperate – which was expressly described in the factual basis to the plea agreement – also had a real consequence to the corporation.  It was a key factor, along with the pervasive criminal misconduct of course, in the decision to seek a guilty plea and the nearly $9 billion in financial penalties.  

This same failure to effectively cooperate plagued Credit Suisse.  In its eventual guilty plea, Credit Suisse admitted that, notwithstanding its knowledge of several criminal investigations by the department for conduct similar to its own, it delayed conducting its own internal investigation, delayed implementing document retention policies and interviewing relevant individuals, and delayed taking adequate remedial measures.  Again, and as acknowledged by Credit Suisse, this delay hampered the ability to uncover the truth and encumbered the scope and progress of the government’s investigation.  In the end, Credit Suisse paid the price – literally and figuratively – for inadequate and untimely cooperation.

Prosecution of Individual Wrongdoers

As these recent examples highlight, a corporation’s assistance in timely uncovering evidence against culpable individuals is the key aspect of the department’s evaluation of that corporation’s cooperation.  This is a point I want to emphasize: producing evidence of culpable individuals is not the only factor, but it is a factor upon which the corporation should always keep its focus.  It will certainly have the focus of the department.

Corporations and financial institutions must understand that to the extent they hamper our efforts to root out and prosecute the culpable executives, they will suffer the consequences.  Again, the BNP Paribas and Credit Suisse resolutions are stark illustrations of this point.  True cooperation, resulting in the department’s ability to hold responsible the individual criminal actors, might have reduced the price paid by those companies.

A corporation cannot act but through the actions of individuals.  And, a corporate conviction cannot be used to shield the culpable executives.  Only rarely should provable individual culpability not be pursued, particularly if it relates to high-level corporate officers, even in the face of a corporate guilty plea or some other disposition against the corporation.  In all cases, the department is committed to aggressively pursuing the culpable executives and individuals wherever possible.

Indeed, the department’s robust record demonstrates exactly that.  Just two months ago, for example, Fraud Section prosecutors convicted the former ArthroCare Corporation CEO and CFO, following a four-week jury trial in the Western District of Texas, of wire and securities fraud in connection with a classic accounting fraud or “channel stuffing” scheme that cost investors $750 million.  And, just a few weeks ago, the two defendants were sentenced to 20 and 10 years in prison respectively.  Two senior executives who pleaded guilty before trial received sentences of five and almost seven years in prison each.   

Our prosecutions in the FCPA sphere also illustrate the aggressive pursuit of individuals.  I have already mentioned the PetroTiger case in which two executives pleaded guilty to FCPA charges, and the department is preparing to go to trial against a third in January.  Additionally, just two months ago, the department announced the guilty plea of a third individual in the FCPA probe of Alstom, S.A., the French power and transportation company.  Three individuals and Marubeni, a major Japanese corporation, have now pleaded guilty to a seven-year scheme to pay bribes to high-ranking government officials in Indonesia in exchange for a $118 million power contract. 

And one hardly need be reminded of the harsh potential prison sentences associated with FCPA convictions.  As just one stark example, in 2011, following his conviction at trial, the former president of Terra Telecommunications Corporation was sentenced to 15 years in prison for his role in a scheme to pay bribes to Haitian government officials at a state-owned telecommunications company in exchange for business advantages.  This was the longest prison term ever imposed in an FCPA case.  The former executive vice president was also sentenced to seven years in prison, and several additional individuals were sentenced to prison.

Put simply, the prospect of significant prison sentences for individuals should make clear to every executive that we will hold you personally accountable for your criminal actions.

Increasingly Global Reach of the Department

Finally, I will highlight another theme again exemplified in our recent corporate resolutions.  An increasingly global economy requires an in-kind global reach by the department.  More than ever before, the department has been called upon to reach beyond our nation’s borders to collect evidence of fraud and corruption, and to prosecute foreign criminal actors, that impact the U.S. markets and economy. 

The importance of the department’s ability to timely collect foreign evidence is confirmed in the terms of its recent corporate resolutions.  Where relevant, the department has built into its deferred prosecution agreements and corporate plea agreements alike the requirement that the subject companies promptly provide all documents requested by government agencies, including documents located abroad, and that they provide prompt and accurate translations of foreign-language documents.

The department, however, need not rely upon corporations’ cooperation to obtain foreign evidence.  We have considerable success – in hundreds of cases every year – in obtaining foreign evidence, including financial and corporate records, through our mutual legal assistance treaties or MLATs.  And the Administration is taking steps to further enhance the department’s MLAT work.  In March of this year, the department announced that President Obama’s FY 2015 Budget proposal called for a significant investment in the reform of MLATs.  These additional resources would allow the department to centralize the MLAT system and reduce its backlog and response time by half.  Although the budget proposal has not yet been accepted by Congress, these additional resources would dramatically increase the department’s ability to respond to foreign requests for evidence located in the United States, provide additional support to our obtaining foreign evidence for our own cases, and undoubtedly lead to greater cooperation and coordination between U.S.-based and foreign authorities charged with investigating fraud in our now global markets.

In turn, that would markedly increase the department’s ability to gather relevant evidence from abroad, regardless of a company’s decision to cooperate.  It would likewise significantly reduce a company’s ability to thwart government investigations by attempting to cloak foreign evidence in the veil of foreign legal protections. 

In short, if U.S. businesses are to expand beyond the nation’s borders, so must the department, lest a large portion of our economy be left exposed to the potential for fraud, corruption and abuse.    

It has been a privilege to speak with you this morning, and I hope that you have found it informative for your efforts to represent your clients in interactions with the Justice Department.

Thank you for having me.

Updated December 2, 2014